The Expert Meeting on the New and Dynamic Sectors of World Trade,
7-9 February 2005, held in Geneva, Switzerland, recommended that UNCTAD give
higher priority attention to work on bio-fuels, including further research,
analysis, technical cooperation, and consensus building. In response to this
need, UNCTAD launched, on 21 June 2005, the BioFuels Initiative by convening
a "small" international advisory Expert Group to assist developing countries
in capturing the multiple-win advantages of greater production, use, and trade
in bio-fuels resources and technology.

In July 2005, the United
Nations Foundation board decided to support the programme Biofuels Initiative
- Trade, Investment, and Capacity Building Opportunities. This grant supports
UNCTAD's efforts to promote the use and production of biofuels as an emerging
trade and investment opportunity for developing countries. It is designed to
assess the trade competitiveness of developing countries in the growing worldwide
use and trade in biofuels, as well as market access and market entry issues
related to imports of biofuels in developing countries. UNCTAD is undertaking
a few country assessments to evaluate real potential for greater use, production
and trade in biofuels. Initial surveys have started for India, Thailand, Brazil
and the Philippines and a few more will be prepared in the coming months. The
Initiative will seek partnerships with other relevant UN and non-UN partners
such as the FAO, UNEP, World Bank as well as NGO's and think tanks such as Earth
Council Geneva, CENBIO - São Paulo and the Tata Group in India.

Rationale

Conventional fossil fuels such as petroleum and its derivatives,
coal and natural gas are the primary sources of energy worldwide. Increasing
greenhouse gas emissions stemming from ever-escalating dependence on fossil
fuel combustion is the single most important source of greenhouse gas concentration
in the atmosphere, causing human-induced climate change. Continued over-dependence
on fossil fuels has economic, social, climate and biodiversity impacts, especially
to the most vulnerable developing countries. Greater awareness on climate change,
its linkages with options available for energy and transportation policies,
the entering into force of the Kyoto Protocol and the emerging carbon market
open new opportunities for developing countries to move towards a sustainable
energy future.

Bioenergy fuels derived from sustainable agricultural practices
provide an opportunity for developing countries to utilize their own resources
and attract the necessary foreign and domestic investment to achieve sustainable
development goals. Greater biofuel production, domestic use and eventual trade
bring multiple benefits. In the context of the current (and increasing) historically
high oil prices, the economics is sound, as a greater share of biofuels in total
primary energy supply can help reduce dependency on oil imports and promote
nationally-developed energy sources. From a developmental perspective, it fosters
the agricultural production of well-known energy crops and promotes rural development
thanks to the availability of accessible technologies to a large extent developed
and tested in developing country regions. And, from an environmental standpoint,
it offers an alternative lower carbon intensive development path, by offering
a way to reduce greenhouse gas emissions, while pursuing energy development
goals and by taking advantage of the financial incentive embodied in the Clean
Development Mechanism (CDM). Lastly, paragraph 31(iii) of the Doha Ministerial
Declaration encourages negotiations on “the reduction or, as appropriate, elimination
of tariff and non-tariff barriers to environmental goods and services” (EGS).
Biofuels derived from sustainable agricultural practices have many attributes
that might qualify them as environmental goods and may provide an opportunity
for developing and middle-income countries to create substantial export markets.

The opportunity at hand is to provide action-oriented assessment
tools that, together with domestic policy and innovative financial instruments,
will enhance the role of bioenergy as part of a successful development strategy.
The programme will coordinate economic and trade policy analysis, capacity building
activities and consensus building efforts towards the ultimate goal of providing
the case for increased production, domestic use, and trade in biofuels.

Contribution to the United Nations Millennium Development Goals
(MDGs)

Goal 1 - Eradicate extreme poverty and hunger

Promoting the use and production of biofuels in developing countries
would provide greater energy security, improved quality of life and economic
development, opportunities for job creation, and poverty alleviation especially
in rural areas. It also fosters the agricultural production of well-known energy
crops and promotes rural development.

Goal 7 - Ensure environmental sustainability

The use of biofuels derived from sustainable agricultural practices
provides an alternative lower carbon intensive development path, by offering
a way to reduce greenhouse gas emissions, while pursuing energy development
goals and by taking advantage of the financial incentive embodied in the Clean
Development Mechanism (CDM).

UN Value Added

The promotion of greater production, domestic use and eventual
trade of biofuels help achieve trade liberalization, greater market access for
developing country exports, development gains, energy diversification and climate
change benefits. UNF has been leading several initiatives in each of these areas
and such programme aims to contribute in bringing tangible results in terms
of actual CDM investment projects submitted and approved by the UNFCCC Executive
Board and in terms of a measurable increase in the percentage of biofuels in
total energy supply.

The Initiative is also in line with UNF's interest in identifying,
developing and implementing sustainable clean energy solutions in addressing
global climate change.

Beneficiaries

Developing countries are the primary beneficiaries of the programme.
The programme will initially be implemented in Brazil, India, Mozambique, Philippines,
and Uganda. Assuming that the greatest potential for the production of biofuels
can be found in the developing countries, the Initiative will benefit those
countries with a clear commitment to introduce biofuels, those interest in assessing
their potential and those interested in increasing exports, as well as CDM project
developers in developing countries. Whereas developed countries, in meeting
their Kyoto commitments, are likely to procure sound CDM projects or increase
importation of biofuels, the initiative will also indirectly benefit developed
country markets.

Major activities from 1 November 2005 to 30 June 2006:

Country assessments of biofuels in India, Philippines
and Thailand. The assessment should include, among others a market survey
covering elements such as economic environment, national policies and strategies,
key players and roles, export possibilities, national supply and international
demand. Please see attached terms of reference.

Preliminary missions to the Dominican Republic and
East Africa drawing on the attached terms of reference for the fact-finding
missions. 3 Organization of a side event at the eleventh session of the Conference
of the Parties to the Climate Change Convention (COP 11) and the first session
of the Conference of the Parties serving as the meeting of the Parties to
the Kyoto Protocol (COP/MOP) in Montréal.

Convening of the International Advisory Expert Group:
The selection of the International Advisory Expert Group will be closely coordinated
with UNF, partner institutions and organizations.

Formulation of a comprehensive implementation strategy
and work plan for the BioFuels Initiative, including partnership strategy
and associated sustainability and scalability strategies.

Policy dialogue in Geneva, Switzerland by June 2006.
Its purpose is to take stock of the first phase of the Initiative, assess
effectiveness of the implementation strategy adopted, showcase early progress
in individual national biofuels programmes, convene an international conference
on biofuels based on the expertise of members to the International Advisory
Expert Group. It will also offer a networking event for current and future
beneficiary countries, the donor community and partners to the BioFuels Initiative.

Formulation/development of objectives and scope
of work for the worldwide market study in close collaboration with FAO and
other partners to be identified.